Babylon's bitcoin staking protocol creates a two-sided market and acts as the control plane of the market. Bitcoin holders can securely lock their bitcoins and choose which PoS chain(s) to stake for and earn yields from. PoS chains and dApps can opt-in to bitcoin-backed security and enjoy high security, healthy economics, and broader adoption. The protocol is modular and can secure any PoS chain. It also enables scalable restaking for bitcoin holders.
Project Background and Funding Situation
Babylon was founded in 2022 by Professor David Tse from Stanford University and Dr. Fisher Yu, a renowned expert in wireless communication for his groundbreaking algorithm for fair scheduling in wireless networks. In December 2023, Babylon completed an $18 million funding round led by Polychain Capital and Hack VC, with Framework Ventures, Polygon Ventures, OKX Ventures, and IOSG Ventures participating. In February 2024, Binance Labs announced its investment in Babylon. In May 2024, Babylon successfully completed a $70 million funding round led by Paradigm to promote the development of trustless Bitcoin staking.
Project Outlook
According to DefiLlama's data, the current BTC yield market size exceeds $100 billion, with main yields reaching $40 billion. The yields range from 0.01% to 1.25%, and most users need to entrust their funds to third-party CeFi institutions or bridge/wrap their Bitcoin. Proof-of-Stake (PoS) blockchain rewards typically range from 5% to 20%. Additionally, most BTC holders are passive holders, with 25% of BTC exceeding 5 years of non-use, and 67% of BTC holding time exceeding 1 year. Therefore, a large majority of Bitcoin remains idle, with only about 1% being wrapped. Through Babylon's staking business, users can obtain 50 times the traditional BTC yield without entrusting their funds to third-party institutions, offering immense growth potential.
Bitcoin is like an isolated island, disconnected from the broader Web3 ecosystem. Babylon will bridge the gap between Bitcoin and other PoS chains and blockchain ecosystems, leveraging Bitcoin's most valuable features: security and decentralization.
Operational Mechanism
Babylon is often referred to as Bitcoin's Eigenlayer. Eigenlayer is built on top of Ethereum staking. If Ethereum does not transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS), Eigenlayer will cease to exist. Babylon can be understood as combining Ethereum's staking and re-staking, applied to Bitcoin.
Babylon allows users to stake their BTC for PoS chains, providing economic security guarantees similar to ETH restaking. The staking process runs entirely on cryptographic mechanisms, without relying on any third-party bridges or custodians.
(1) Shared Security
BTC stakeholders can send a transaction with two UTXO outputs to implement staking. The first UTXO writes a time-lock script that expires at a later date, allowing the stakeholder to unlock their BTC using their private key. The second UTXO is transferred to a temporary Bitcoin address that satisfies the "once-only signature EOTS" cryptographic standard.
When a BTC stakeholder runs a PoS chain node, they verify a unique valid block and sign it with their EOTS private key.
If the stakeholder (also the validator) remains honest, they will receive a reward for each valid block. If they try to misbehave by signing two blocks at the same height, their EOTS private key will be rolled back, allowing anyone to use this private key to transfer the staked BTC on the Bitcoin chain, effectively penalizing them.
(2) Timestamp Service
Any blockchain's checkpoint data can be uploaded to a Bitcoin op_return, increasing security.
Babylon's solution is the world's first trustless Bitcoin staking protocol. Through this protocol, Babylon enables any Bitcoin holder to stake their Bitcoin securely and independently on the Bitcoin chain, protecting any PoS chain in the world.
The Babylon ecosystem is rapidly expanding, with many well-known cooperative relationships established, including over 20 Bitcoin staking protocol testnets integrated and partnerships with Cosmos, AltLayer, Polygon, and Bitcoin Layer2. By enabling users to safely stake their assets and earn yields, these projects have joined the Babylon ecosystem, paving the way for a decentralized world where Bitcoin's utility far exceeds its traditional role as a value store.
Latest Progress
The second staking round of Babylon's Bitcoin staking testnet-4 is scheduled to go live on June 5, 2024! The activation height is expected to reach 198,665 around UTC time at 9:00 am.